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Judge Stark Finds Temporary Sales Representatives Do Not Create a Regular and Established Place of Business for Purposes of Venue

On September 11, 2017, Judge Stark (D. Del.) granted the defendants' motion to transfer venue in Boston Scientific Corp. v. Cook Group Inc., C.A. No. 15-980-LPS-CJB (D. Del. Sept. 11, 2017). The court first held that defendants Cook Group Inc. and Cook Medical LLC had not waived their opportunity to move for transfer. The court went on to find that the defendants did not maintain a regular and established place of business in Delaware. Consequently, the court granted the motion to transfer the case to the Southern District of Indiana. The 34-page opinion also laid out a summary of the status of the law in the wake of the Supreme Court's TC Heartland opinion.

Waiver: The first question the court addressed was whether the defendants had waived their opportunity to challenge venue. At the time the defendants filed their motion to transfer, the case had already proceeded through discovery and claim construction. The plaintiff therefore argued that the defendants failed to timely raise their venue objection. The defendants, however, contended that the Supreme Court’s TC Heartland opinion represented an intervening change in the law, thus excusing their delay in challenging venue. Judge Stark concluded that TC Heartland did change the law. First, Judge Stark found that TC Heartland did not merely reaffirm the Supreme Court’s prior 1957 ruling in Fourco. Instead, TC Heartland was the first Supreme Court opinion to address whether Congress changed the patent venue rules when it amended the general venue provision (§ 1391) in 1988. The Federal Circuit found in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (1990) that the 1988 amendments to § 1391 also altered the venue provisions applicable to patent cases (from § 1400). Judge Stark found that, by overturning VE Holding, the TC Heartland opinion changed the controlling interpretation of § 1391. Second, Judge Stark held that regardless of the technical posture of VE Holding, the Federal Circuit’s decision established the patent venue rules from a practical perspective. Defendants thus had no meaningful opportunity to challenge venue prior to TC Heartland. Consequently, the court allowed defendants to proceed with their motion to transfer.

Regular and Established Place of Business: The court next identified a number of principles governing whether a defendant has a regular and established place of business in Delaware. First, the court held that a formal office or physical storefront is not required to demonstrate a regular and established place of business, but some physical presence by the defendant is required. Second, the court noted that doing business in a district, in itself, is insufficient to demonstrate a regular and established place of business. Third, the court held that merely having minimum contacts with Delaware, as required for personal jurisdiction, are likewise not sufficient for venue. Fourth, the court found that a website or internet presence does not constitute the type of continuous and permanent contacts required for a regular and established place of business. Finally, merely shipping goods into a district does not create a regular and established place of business.

Applying these rules, the court held that defendants did not have a regular and established place of business in Delaware. The court specifically found that the presence of traveling sales representatives, none of whom reside in Delaware, did not create the sort of regular and established place of business sufficient to confer venue.

Having found venue in Delaware improper, the court turned to the question of remedy. Neither party contested that venue would be proper in the Southern District of Indiana. Consequently, the court held that given the advanced state of the litigation, justice would best be served by transferring venue rather than dismissing the case.

The court’s holding in this case provides a comprehensive treatment of the post-TC Heartland law, and should provide a template for similarly positioned defendants to follow.

Compare jurisdictions: Litigation: Enforcement of Foreign Judgments

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